Material Impacts on the Precision Machining Industry - June 2009
An abnormal state in which the normal flow is slowed or stopped is called "stasis." With the exception of copper and brass (up ~ 40 percent since January 2009) stasis is a good descriptor of raw materials pricing trends these days. Demand for final products, not availability of raw materials, is the primary determinant of raw material prices. It doesn't matter how much iron ore you have in your mine, if no one is buying cars, that ore is just rocks in the ground. Several 'Green Shoots' are identified as indicating a possible bottom for manufacturing.
The prices of the raw materials that we track are down since January, with the exception of copper and brass, which is up 40 percent since January. Year over year, all prices are down significantly. Price swing (Δ) from January 2009 to May 2009:
Aluminum: Down 4.41percent price variation (Δ)
Copper: Up 40.52 percent same time frame.
Nickel: down 17.78 percent
Steel: Down 15.69 percent in the same period
China Coke: down 4.02 percent
Perhaps there is one lesson to be learned in these figures: Demand for products is the primary determinant of raw material prices for manufacturers, not supply!
Green Shoots
1) While the increase in prices for copper and brass are immediate in their effect on our bottom line, they also may be indicating a recovery in the broader economy as copper is so well integrated into our lifestyle.
2) The Labor Department reported that the economy lost only 345,000 jobs in May. This is down from 504,000 in April, and 2.1 million for the prior three months. This slowing pace of job loss may be our best indicator that the
bottom is near. (More at the end of this report.)
Read the complete June 2009 Material Impacts Report (PDF format) here.
